Wine Equalisation Tax New Measures Presented by Naomi Schell and - PowerPoint PPT Presentation

Wine Equalisation Tax New Measures Presented by Naomi Schell and Sally Fonovic – ITX Excise Product Leadership

Overview • Changes explained o Cap reduction o Associated producers o Eligibility criteria o Quoting o WET credits o Application and transitional provisions • ATO support • Questions UNCLASSIFIED 2

Cap reduction and associated producer amendment

Cap reduction & associated producer test • $350,000 from 1 July 2018 • applies to a producer, or a group of associated producers • associated producer test applies at any time during the financial year from 1 October 2017 UNCLASSIFIED 4

Associated producers – s19-20(1) ‘Connected’ – Producer 1 or affiliate has direct or indirect control of Producer 2 * Producer 2 under an obligation or reasonable expectation to act in accordance with directions or wishes of Producer 1 Producer 1 Producer 2 Associated * Relevant to branding requirement UNCLASSIFIED 5

Associated producers – s19-20(2) 3 rd Entity Producer 1 under an obligation or reasonable Producer 2 under an obligation or reasonable expectation to act in accordance with directions or expectation to act in accordance with directions or wishes of same 3 rd entity wishes of same 3 rd entity Producer 1 Producer 2 Associated UNCLASSIFIED 6

Associated producers – s19-20(3) Producer 3 Producer 1 under obligation to act in accordance Producer 3 under obligation to act in accordance with directions or wishes of Producer 3 with directions or wishes of Producer 2 Producer 1 Producer 2 Associated UNCLASSIFIED 7

Eligibility criteria

Eligibility Criteria 1. Producer of the wine 2. Either: o Producer is liable to remit WET; or o Purchaser quotes and indicates they will have a WET liability for the wine 3. Own source product for at least 85% of the wine prior to crushing 4. Packaged for retail sale – 5L (51L for cider and perry) 5. Branded with a trade mark UNCLASSIFIED 9 * Refer to flowchart included in handouts

Who is a producer?

Definition of producer • You produce wine if you: o manufacture the wine; or o supply another entity with the ‘source product’ to manufacture the wine on your behalf UNCLASSIFIED 11

Definition of producer – manufacture the wine • Manufacture includes: o production; o combining parts or ingredients so as to form an article or substance that is commercially distinct from the parts or ingredients; and o applying treatment to foodstuffs as a process in preparing them for human consumption • Definition of manufacture is not exhaustive • ATO considers the facts of each case UNCLASSIFIED 12

Definition of producer – supply source product • What is ‘source product’? o Grape wine - grapes* o Grape wine product - grapes* o Fruit or vegetable wine - fruit or vegetables* o Cider or perry - apples or pears* o Mead - unfermented honey o Sake - unfermented rice * In whole, unprocessed form UNCLASSIFIED 13

Liability for WET

Liability for WET • Producer must be liable for WET for the wine; or • Wine sold under quote – purchaser notifies it will have a WET liability for the wine UNCLASSIFIED 15

Liability for WET - Producer Producer has WET liability o Wholesale sales (not under quote) o Cellar door sales o Applications to own use (AOU) • Tastings • Samples • Own consumption • Transfer of title other than a sale UNCLASSIFIED 16

Liability for WET – Purchaser Purchaser has WET liability o Wine purchased under quote and purchaser indicates they will not : • make a GST-free supply • use the wine in manufacture or treatment or other processing • sell the wine under quote • Note - purchaser will have WET liability on their subsequent dealing regardless of how they deal with the wine UNCLASSIFIED 17

No entitlement to rebate – purchase under quote • Producer cannot claim rebate where the quote notifies an intention to o make a GST-free supply o use the wine in manufacture or other process o sell the wine under quote UNCLASSIFIED 18

Ownership of source product

Ownership of source product • What is ‘source product’? o Grape wine - grapes* o Grape wine product - grapes* o Fruit or vegetable wine - fruit or vegetables* o Cider or perry - apples or pears* o Mead - unfermented honey o Sake - unfermented rice * In whole, unprocessed form UNCLASSIFIED 20

Ownership of source product • Only entitled to rebate where at least 85% of the total volume of the wine originated from source product wholly ‘owned’ by the producer: o from immediately prior to crushing (fermentation for mead and sake) o until it is placed in containers which satisfy the packaging and branding rules UNCLASSIFIED 21

Ownership of source product - contracts • Ownership = good title to source product • Effective retention of title ( Romalpa ) clauses in grape supply contracts may mean ownership requirement not met • Grape supply contracts may need to be examined UNCLASSIFIED 22

Ownership of source product - records • Evidence of source product ownership may include: o written grape supply contracts o weighbridge documents o tax invoices o production records UNCLASSIFIED 23

Deemed source product Substances added to wine are taken to be source product: o grape spirit o brandy o alcohol used in preparing vegetable extracts o ethyl alcohol o water o grape juice concentrate (no more than 10% of volume) o any other substance ( together with similar substances - no more than 1% of volume) UNCLASSIFIED 24

Deemed source product • Additives deemed to be source product can only be added where allowed under the definition of each product o For example, brandy could not be added to fruit or vegetable wine as it is prohibited under the definition of fruit or vegetable wine in s31-4 of the WET Act • Note - where the allowable amount of a deemed product is exceeded, the entire amount will be a substance other than source product when determining whether 85% rule is satisfied UNCLASSIFIED 25

Example - 85% source product rule – not satisfied Vigneron Co manufactures a Grenache Shiraz Mouvedre wine, which is packaged in branded 1 litre bottles. Of the total volume of the wine: • 820ml originated from fresh unprocessed grapes owned by Vigneron Co • 150ml is purchased bulk wine • 10ml is purchased unfermented Grenache grape juice • 10ml is purchased unfermented Shiraz grape juice • 8ml is purchased unfermented Mouvedre grape juice • 2ml is preservative UNCLASSIFIED 26

Example - 85% source product rule – not satisfied The three portions of grape juice each comprise 1% or less of the total volume of the wine. However, they are considered to be ‘similar substances’ and must be considered collectively for the purpose of the deeming provisions. The grape juices comprise 28ml (2.8%) of the total volume of the wine and are therefore NOT taken to be source product for which the producer satisfies the ownership test. The preservative, a different substance, comprises only 0.2% of the total volume of the end product and as such is taken to be source product that satisfies the ownership test. UNCLASSIFIED 27

Example - 85% source product rule – not satisfied Only 82.2% of the GSM wine (being 82% from grapes owned by Vigneron and 0.2% preservative) satisfies the source product ownership rules for Vigneron Co. The remaining 17.8% of the total volume is not source product. Vigneron Co does not satisfy the 85% source product ownership rule for this wine. UNCLASSIFIED 28

Packaging requirements

Packaging • The wine must be packaged in a container, which does not exceed : o 5 litres – grape wine, grape wine product, fruit and vegetable wine, mead, and sake o 51 litres – cider and perry • Packaging must be ‘suitable for retail sale’ - in a form consumers would ordinarily expect to find the product sold at the retail level • Packaging must include regulatory markings and meet the branding requirements UNCLASSIFIED 30

Branding requirements

Branding requirements – trade mark • Container must be branded with a trade mark that: o is a ‘trade mark’ within the meaning of the Trade Marks Act 1995 o identifies, or is readily associated with, the producer o is owned by the producer (or an associated entity); and o satisfies one of the following:  is registered  an application has been lodged and is pending  has been used by the producer since 2015 UNCLASSIFIED 32

‘Branded’ with a ‘trade mark’ • Container that immediately holds the wine at time of dealing must be branded – i.e. label on bottle/carton for cask wine - insufficient for carton holding cleanskins to be branded • Must be a ‘trade mark’ within the meaning of the Trade Marks Act 1995 – very broad, and includes any combination of: o letter, word, name, name signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound, or scent. • Used to distinguish goods or services from the goods or services of others UNCLASSIFIED 33